Question
Suppose today is June 1st, and a cereal manufacturer will need to purchase wheat on December 1st. To hedge the price of wheat, the company
Suppose today is June 1st, and a cereal manufacturer will need to purchase wheat on December 1st. To hedge the price of wheat, the company plans to enter into a January futures contract today and close out its position on December 1st. Suppose today the spot price is $71.82 and the January futures price is $74.73. Suppose on December 1st the spot price turns out to be $73.98 and the January futures price turns out to be $74.11. After taking hedging into account, how much will the company effectively pay for the wheat? (Round your answer to 2 decimal places. Do not include $ sign.)?
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